On December 19, the US radio frequency giant Qorvo announced that it has sold the business and assets of two manufacturing plants in Beijing, China and Dezhou, Shandong Province, including property, plant and equipment and existing employees, to the well-known equipment manufacturer Lichun Precision.

Grant Brown, Qorvo’s chief financial officer, said: “This transaction further helps us reduce capital intensity and achieve our long-term gross margin targets, while ensuring business continuity for our customers in China.”

Despite the sale of the plant, Qorvo continues to maintain sales, engineering and customer support staff in China. In addition, according to the newly signed long-term supply agreement, Qorvo’s follow-up supply tasks such as RF product assembly and testing in China will be completed by Lichun Precision.

The deal is expected to close in the first half of 2024, according to both parties.

1 RF giant Qorvo’s trip to China

Qorvo, along with Broadcom and Sijiasun, is known as the three RF giants in the United States. Its main products are RF integrated circuit products, including 5G base stations and RF chips for mobile devices such as smartphones.

In 2022, Qorvo will hold 15% of the global RF front-end market share. Qorvo’s biggest customer is Apple, which accounted for 37% of the company’s total revenue as of April 2023.

Qorvo is the predecessor of the United States head RF manufacturers TriQuint and RFMD. Around 2001, mobile devices entered the rapid development of the popular period, the Chinese market of mobile phone parts demand is huge, in order to minimize the delivery time, Qorvo’s predecessor RFMD with Nokia and other manufacturers in Beijing to build a manufacturing plant, the Beijing factory is one of the factories Qorvo sold.

In 2015, TriQuint and RFMD merged to form Qorvo. After the merger, Qorvo combines the technology, customer and other key resources of the two companies to complete the industry-wide layout of power amplifiers, filters and RF. Since then, it has coincided with the rapid innovation and iteration of mobile devices and communication technology, which has brought huge demand for RF equipment, and it has soon ushered in a period of rapid development.

As the market size and order volume surged, the Beijing factory was no longer able to provide sufficient capacity. On July 14, 2016, Qorvo’s second factory in China was officially put into operation in Texas. Similar to the business of the Beijing plant, the main business of the Dezhou plant in Shandong is the assembly, packaging and testing of RF devices.

Similar to the way most multinational companies operate, Qorvo puts the core research and development of chips in the United States headquarters, semiconductor production is contracted by mature manufacturers such as TSMC, and the factory in China is mainly responsible for the most downstream of the chip production process, which is also the least technical step: assembly, packaging and testing of the finished product.

But today’s mobile phone market has shifted from the “first phone” to the “new phone” era. Although the new mobile phone needs more RF chips than the old model, the overall market demand for RF chip production capacity is not as strong as ten years ago, which is also a big reason for Qorvo to abandon the independent factory in China and turn to Licxun foundry.

2 Lishun Precision: Apple supply chain giant

The acquirer is also one of Apple’s main suppliers, mainly supplying precision structural parts, modules, components for Apple, and providing contract manufacturing services such as the assembly of Apple’s product line. The acquisition of Qorvo’s China plant is a big step for Lichun Precision in the RF field, and also makes Lichun’s position in Apple’s supply chain further.

In Lichun Precision’s 2022 financial report, the revenue of consumer electronics business was 179.7 billion yuan, accounting for 83.95% of the total revenue. And consumer electronics has a large customer’s business amount of 156.8 billion yuan, accounting for 73.28% of the company’s total annual sales. Although not specifically stated in the earnings report, that customer was none other than Apple.

 

It’s good to have the shade of a tree behind you, but a single source of income also means that both sides benefit and lose. Lichun Precision is also very clearly aware of this, and clearly stated in the financial report that “the company’s customer concentration is relatively high, and short-term mainly concentrated in the field of consumer electronics.” If important customers have serious business problems, the company will also face certain business risks.”